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A bottomless pit of bottoms?



June 01, 2010 – Comments (16) | RELATED TICKERS: OPTR.DL , EXEL

How many bullets has the market fired at us? Is there still one left in the chamber? Do you feel lucky? Well, do you punk?

My war-weary long positions took another blasting today but my GBMB portfolio held up fairly well, especially my latest additions. I've still got a lot of dry powder so when the market drops a cap in my ass, I shoot back. Here's two more bottoms to put a slug into.

Optimer Pharmaceuticals (OPTR) - market cap 385M, share price 10.07. Cash 81M, debt 0, burn 10-13M. Optimer has completed two solidly positive phase III trials for each of two developmental antibiotics, fidaxomicin for clostridium difficile colitis and prulifloxacin for traveler's diarrhea. Despite reporting positive topline results of the second phase III trial of prulifloxacin well over a year ago, there has been no word on an NDA or a partnership and the drug was barely mentioned in the last quarterly PR. However, an NDA application for fidaxomicin will be filed in the second half of 2010. After raising 51M in a dilutive financing in March, the company should be set for cash through the fidaxomicin PDUFA. Some questions have been raised regarding whether the phase III trials truly demonstrate that fidaxomicin is superior to the standard of care. These concerns may relate to why the share price has never taken off despite phase III successes. But the share price is now close to an eighteen month low and it is hard to foresee that it will not recover once the fidaxomicin NDA is submitted. In CAPS, Portefeuille is a bloodied believer. I'll be a GBMB buyer below 10.

Exelixis (EXEL) - market cap 531M, share price 4.89. Cash 153M, debt 76M, burn 25-45M. The most heavily green-thumbed baby biotech in CAPS is also one of the most frustrating. Exelixis has been around more than ten years and the share price has been below 5 for about 5% of that time. I won't get into the extremely complex and wide pipeline, but suffice it to say that a lot of trials are going on and positive or negative catalysts could occur at any time. Dilution is always a possibility. However, nothing about Exelixis's current position indicates that they should be significantly undervalued compared to their historical valuation. Green-thumbers are a virtual CAPS All-Star team, including Vanamonde, Eldrehad, NTMF, SpecBear(!), and Portefeuille although admittedly most of those picks are ancient and deeply under water. I see this as a GBMB buy under 4.5.

I'm currently in MYGN, ITMN, RIGL, IDRA, DSCO, BDSI, and FOLD and I expect I'll likely be in MYRX, OPTR, RTIX, and possibly SVNT if current trends continue. I'll update my positions and track record again some time this month.    






16 Comments – Post Your Own

#1) On June 01, 2010 at 6:26 PM, soycapital (< 20) wrote:

Yeah, keep us up to date, buying time coming up and looking for opportunities!


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#2) On June 02, 2010 at 2:05 PM, dcsilver (< 20) wrote:

Especially curious about your thoughts on BDSI.  Are they starting from scratch or is their mediciation vehicle going to get picked up by other countries and become a money maker?

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#3) On June 03, 2010 at 3:09 PM, zzlangerhans (99.55) wrote:

Don't ask the guy who's underwater on the investment. I'm in wait and see mode for the time being. No inside info here.

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#4) On June 12, 2010 at 5:17 AM, nilesgold (21.83) wrote:

Curious as to your thoughts on the DSCO phase II results that were announced a few days ago for Surfaxin and if your original investment thesis still remains intact.  I'm not savvy enough to tell if the results are devastating to Surfaxin or just noise.


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#5) On June 12, 2010 at 4:43 PM, zzlangerhans (99.55) wrote:

My interpretation is that it represents a great buying opportunity. The short-term story for Discovery is approval of Surfaxin for RDS in premature infants. If Surfaxin is seen as having a chance of approval for this indication the share price will head back north of 1, regardless of any prospects for Surfaxin in ARF. In July 2009 the share price bottomed at 0.35 after the company issued a pessimistic statement regarding their meeting with the FDA in the wake of the last Complete Response letter. By the end of September 2009 the share price was 1.36. Yes, that's a four-bagger in two months. Did I mention this stock is volatile? So in summary, the ARF data is bad for long-term bagholders with a cost-basis of 2 or 3 unless they have the cojones to average down massively. With my 25000 shares at a cost basis of 0.5, I would average down to 50000 shares at 0.4 if this hits 0.3. If Discovery can keep it together enough to resubmit Surfaxin for RDS in Q1 2011, they'll go back over 1 before the FDA responds. I'm extremely unlikely to buy more than 50000 shares of Discovery - this is a good bet but not a sure thing.

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#6) On June 12, 2010 at 9:43 PM, mhy729 (30.30) wrote:

Thanks for sharing your thoughts on DSCO.  I had the same basic idea when I picked up some shares at 0.3250.  Great to hear my thought process confirmed by you.

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#7) On June 17, 2010 at 10:40 AM, mhy729 (30.30) wrote:

Well DSCO has certainly fallen below 0.3...what do you make of the new public offering?

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#8) On June 17, 2010 at 11:08 AM, zzlangerhans (99.55) wrote:

I thought they had enough cash to make it through the resubmission but apparently I was wrong. I bought another 25000 shares at 0.245 for a total of 50000 shares at an average of 0.375, and I'm done. I'm not planning to look at this stock or think about it much for the rest of 2010, unless they go back over 1. Good luck!

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#9) On June 23, 2010 at 4:11 AM, expatriot08 (31.10) wrote:

EXEL is in a funk ah. It is looking  pretty tasty though.

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#10) On June 23, 2010 at 9:13 PM, zzlangerhans (99.55) wrote:

3000 shares bought yesterday at 3.69. Yum.

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#11) On July 26, 2010 at 8:01 AM, expatriot08 (31.10) wrote:

how do you see this effecting BDSI? any thoughts? 

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#12) On July 29, 2010 at 11:33 AM, zzlangerhans (99.55) wrote:

I don't see it affecting BDSI in any predictable manner.

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#13) On August 10, 2010 at 7:06 AM, fransgeraedts (99.46) wrote:

Dear zz

i am a long term fan.

I have two questions:

1. Are there other biotechinvestors here on caps that you would recommend?

2. Of the factors outlined in your GBMB strategy the most intruiging is the long term potential. Could you outline your views on the different types of biotech out there and how you rate their potential?


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#14) On August 10, 2010 at 11:51 PM, zzlangerhans (99.55) wrote:

There's only Portefeuille. He has a sense of when stocks are going to make an upward move completely independent of catalysts. The others are generally of the desperate cheerleader or blanket pessimist variety. I'll write a post categorizing biotechs sometime soon, once I've updated my GBMB progress. Thanks for the support. If you wrote some pitches, I think it would add a lot to the site.

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#15) On August 11, 2010 at 7:12 AM, fransgeraedts (99.46) wrote:

Dear zz,


I am looking forward very much to your posts about the long term potential of the various technologies. I agree with you about P's uncanny knack.

I do not write pitches because i do not select stocks. And i do not want to suggest otherwise because people could act on what they could think is a stock selection.

I make sectorbets based on a macro-economic analysis combined with a "technical" analysis of the financial markets.

For example: i think that the chances of a double dip of the worldeconomy have become very high because of the  combination of (partly) wrong stimulus measures in the US and the enormous cutbacks in government spending already decided in Europe. (On top of course of the consumerstrike all over the West, the reluctance of banks to lend and of business to invest.) I monitor the developements in the Chinese econmomy closely because i think that could be where a very nasty surprise lurks. Because i think the chances for a double dip are high i am looking for a top in the equity markets. I am thinking about but have not yet reached a conclusion about sectorrotation within the double dip. On Caps i have now done away with almost all my winners from the leg up and also got rid of the old mistakes. I am slowly building a bearish position again. How certain i am can be seen from the amount of picks. When i am really certain (which of course doesnt mean i am right! grin) i am at 200 picks. I am under 50 now.


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#16) On August 11, 2010 at 10:01 AM, zzlangerhans (99.55) wrote:

I forgot about PDTBiotech. He's much more knowledgable than I am and I believe he works in the industry. But he has only made 22 picks over three years and hasn't been around for months. Check out his Average Pick Score though.

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